On Thursday, HSBC analyst Parash Jain upgraded shares of DSV A/S (DSV:DC) (OTC: DSDVF) from Hold to Buy, setting a new price target of DKK 1,700.00, up from the previous DKK 1,300.00. The adjustment reflects a change in valuation approach in light of DSV’s anticipated acquisition of DBS, expected to close in the second quarter of 2025.
The analyst noted that DSV’s share price has surged by 42% since the end of June, outperforming the KFX index, which fell by 14% over the same period. This rally came after the acquisition was confirmed on October 3, 2023. The new valuation method is based on a target enterprise value to earnings before interest and taxes (EV/EBIT) multiple, combined with an estimate of the integrated EBIT of DSV and DBS.
HSBC's target EV/EBIT multiple of 19.5x is consistent with DSV’s average 12-month forward EV/EBIT since 2016. This multiple is applied to the firm’s projected 2028 earnings before interest and taxes (EBIT) post-DBS integration. These projections are then discounted to the end of 2025 using a weighted average cost of capital (WACC) of 8%.
The analyst's scenario analysis suggests a bull case with a fair value per share of DKK 1,900 and a bear case with a value of DKK 1,440. This range indicates varying degrees of potential performance based on different market conditions and outcomes of the DBS integration.
The upgrade and new price target by HSBC are based on the strategic implications of the acquisition and a revised financial forecast for the combined entity of DSV and DBS, though the forecasts do not yet reflect the acquisition's finalization.
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